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What a FICO Score Is and Why It Matters

This three-digit number is crucial in shaping your financial future. Here’s what you need to know.

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You have three credit scores that summarize your creditworthiness to lenders. And each score can have a big impact on your financial future. Each score is based on different factors and forms, depending on how it’s calculated. And because different lenders use different scores, it’s best to keep each one in good shape. 

Your FICO score is one such model. It’s one of three scoring models used by lenders -- VantageScore and Equifax are the other two -- and the most popular, used by approximately 90% of top lenders in the US

Read on to learn more about the FICO score and how to keep yours in shape to improve your standing with credit agencies. 

What is a FICO score?

A FICO score is a three-digit number that’s based on five factors: payment history, amounts owed, length of credit history, new credit and credit mix. There’s no one-size-fits-all model for credit scores and your credit report. Whether lenders check your FICO score or VantageScore, a good credit score can help you secure the best rates on your credit cards, loans and insurance. And each category will depend on your finances. 

What is the FICO score range?

The FICO score ranges from 300 to 850 and helps lenders evaluate the financial risk of a prospective borrower. It measures, among other things, how long you’ve had credit, if you’ve paid on time and how much credit is being used. The FICO score range is broken up into five categories:

800-850: Exceptional
An “Exceptional” FICO score is your ticket to qualify you for the best rates and loan terms. 

740-799: Very Good
Borrowers with a “Very Good” score are assessed as low risk and above average, receiving more favorable terms. 

670-739: Good
The average FICO score in the US of 714 falls comfortably in this range. Most lenders are willing to lend to borrowers who have a “Good” FICO score. 

580-669: Fair
Although considered below average, people with a “Fair” score may be approved for a loan by lenders, but with less favorable terms. 

300-579: Poor
A score under 580 is considerably below average and a red flag by potential lenders. 

How is a FICO score determined?

A FICO score is calculated by pulling data from the three credit bureaus: Equifax, Experian and TransUnion. It’s based on the following factors:

  • Payment history (35%): This is the most influential factor in your score. It takes into account how reliably you pay your bills on time and in full.
  • Amounts owed (30%): Based on the ratio of your total credit to your total debt -- also known as credit utilization. High credit utilization can negatively impact your score and be a red flag to lenders and issuers if you’re spending most of the credit you have available. 
  • Length of credit history (15%): How long you have credit affects your score. This is calculated by considering the length of the oldest (and newest) accounts plus the average length of all of your accounts. 
  • Credit mix (10%): Having a variety of credit accounts helps lenders determine if you can handle different types of accounts -- be it loans or credit cards. While this accounts for only 10% of a FICO score, having installment loans and revolving credit can help your score. Just remember to use your credit responsibly. 
  • New credit (10%): New credit reflects the number of recently opened credit accounts and hard credit inquiries from creditors when applying for credit. 

Other factors that can impact your FICO score

While the breakdown of your FICO score may seem complex, other factors can impact your score. 

Closing a credit card or account: “Closing the account could negatively impact your FICO Score by reducing your utilization,” said Tommy Lee, senior director of Scores and Analytics for FICO. Reason being, revolving credit utilization (which is the amount of credit you’re using compared with what you have available) is an important factor in the “amounts owed” category, he added. 

A hard credit inquiry: “A hard inquiry could lower your FICO score by several points depending on other factors in your credit report,” Lee said. However, keep in mind that inquiries and new account openings combine to make up the “new credit” category that consists of only 10% of your FICO Score calculation -- which isn’t as impactful as other factors, he added. 

Too many inquiries: Opening several new accounts in a short period of time will lower the average age of your accounts. This accounts for the length of credit history that makes up 15% of your FICO score. “Rapidly opening accounts when you’re new to building credit can be viewed as risky in the eyes of lenders,” Lee said. 

Opening a credit card: “Opening your first credit card could help your FICO Score by improving your credit mix,” Lee said. Practicing good credit habits with your first card can show lenders that you’re responsible and can manage different kinds of credit. It can also make you seem less risky to lenders. “Additionally, if you open a new credit card account but keep your credit utilization low, this can also increase your credit score,” said Lee. 

How to increase your FICO score

Improving your FICO score takes time, but it’s possible with the right moves, which includes the following:

  • Use a monitoring service to track your credit score. 
  • Get your credit report from all three bureaus at least once a year to review it and dispute any mistakes that may lower your score. All credit bureaus have a dispute resolution process to help you. Currently, the three credit bureaus continue to offer free weekly online credit reports through
  • Decrease credit utilization by keeping your balances low on revolving lines of credit such as credit cards. Experts recommend you keep your credit utilization below 30%. 
  • Address any missed payments to date. You can also set up autopay to help you stay on top of your bills. 
  • Pay down debt by making more than the minimum monthly payment.
  • Refrain from closing your oldest credit card accounts, but keep them in good standing. 
  • If you are an authorized user on someone else’s account, make sure that data is being reported to the credit bureaus. 
  • Check to see if your lender participates in FICO® Score Open Access to check your score and the factors impacting it. You can also see if your preferred lender uses the program. 

Aside from these tips, the most important thing to do is to make every payment on time. 

“Paying on time is the most important category of the FICO Score calculation, as payment history makes up 35% of the FICO Score calculation,” Lee said. “The first thing any lender wants to know is whether you’ve paid past credit accounts on time. This helps a lender figure out the amount of risk it will take when extending credit.”

The bottom line

A FICO Score is an essential tool for understanding your creditworthiness and can be a key factor in lenders’ decisions on loan offers, interest rates and other financial opportunities. A good FICO Score can help you save money and secure the best rates. Still, to maintain a good credit score, you must prioritize on-time payments, low credit utilization and paying down existing debts.

Correction: An earlier version of this article was assisted by an AI engine and it misstated details about the VantageScore credit score. That section was removed. This version has been substantially updated by a staff writer.

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Dashia is a staff writer for CNET Money who covers all angles of personal finance, including credit cards and banking. From reviews to news coverage, she aims to help readers make more informed decisions about their money. Dashia was previously a staff writer at NextAdvisor, where she covered credit cards, taxes, banking B2B payments. She has also written about safety, home automation, technology and fintech.